Alexandria Company prepares its financial statement in US$. On November 1, Year 1, Alexandria Company receives a non-cancelable order (a purchase order) from a foreign customer for 100,000 francs to be received when goods are sold on April 30, Year 2. On November 1, Year 1, Alexandria Company entered into a six-month forward contract to sell 100,000 francs on April 30, Year 2. Alexandria designates the forward contract as a fair value hedge of a firm commitment. The fair value of the hedge is to be determined from the spot rates.

Relevant exchange rates for the franc are:

	Date	Spot Rate	Forward Rate (to April 30, Year 2)
	November 1, Year 1	$0.51	$0.48
	December 31, Year 1	0.40	0.38
	April 30, Year 2	0.45

Alexandrias incremental borrowing rate is 12%.

The forward contract is properly designated as a fair value hedge of a firm commitment.